Don't Just Show Results, Tell the Story

What happens when execution isn't enough to raise capital?

In this episode of KP Unpacked, KP Reddy and Nick tackle a critical founder mistake: obsessing over traction while forgetting to sell the vision. Inspired by a portfolio company struggling to fundraise despite excellent execution, they unpack why venture capital demands storytelling (not just proof points) and why construction tech founders in particular fall into the "show me" trap when they should be in "tell me" mode.

The conversation spans SaaS market dynamics (why KP canceled Salesforce mid-contract), the psychology of software loyalty (people love Excel, tolerate Salesforce), and why personalization unlocks joy in enterprise tools. Then they pivot to fundraising fundamentals: Elon Musk could pitch on outcomes alone but chooses to tell the Mars story. Why? Because investors back energy, mission, and vision, not spreadsheets.

Key topics covered:

• Why KP canceled Salesforce after prepaying for the year and what that signals about SaaS churn in 2026
• The difference between software people love (Excel, Milwaukee Tools) vs. software they tolerate (Salesforce, SAP)
• Why usage data won't show up in earnings until 2027 and why the market is pricing in fear, not facts
• Application layer thesis: why natural language interfaces will replace system-of-record UX entirely
• The critical founder error: pitching what you've done instead of where you're going
• Show me vs. tell me: how to know when investors need vision, not validation
• Why Elon Musk still tells the Mars story despite decades of execution proof
• The hustler/hacker co-founder dynamic and why two hackers never raise capital
• Why construction tech founders index too hard on substance and struggle with showmanship
• How to separate customer narratives (narrow, fact-based) from investor narratives (expansive, visionary)
• The modern equivalent of "nice office space": swag stores, media presence, and dinner party bragging rights

If you're a founder who's executing well but struggling to raise, an investor trying to understand why traction isn't translating to term sheets, or an operator wondering why personalization matters more than features, this episode will reset your fundraising strategy.

Listen now.

BuildingWorks & Brookwood Sponsors

Transcript

Setting The Energy And Agenda

SPEAKER_00 0:40

Hey KP, how are we doing? I'm doing good. Got a sultry voice voice today. I heard I heard a great quote this week that podcasting is energy transmission. Oh my god. So I'm gonna bring I'm gonna bring the energy today. Okay. I'm gonna try.

SPEAKER_03 1:00

You're usually the you're usually the the uh demure one of the two of us.

SaaS Selloff And Incumbent Risk

SPEAKER_00 1:05

Sultry and demure are two words that are around. Let me close my door. Yeah, I'm gonna I'm gonna I'm gonna try to ramp it up. Let's see, where do we start?

SPEAKER_03 1:17

Well, let's start with let's see, let's start with these SAS markets.

SPEAKER_00 1:22

Yeah, you've put on put on some shorts and some of your favorite SaaS stocks, I hear. If yeah, if you send me the some of those trade detail details, I might take the counterposition at this point. Yeah. I I I for what it's worth, I do think so. You know, if for anyone who's listening, yeah, this the big software companies that are that are are in the red, you know, basically over the last month, last couple weeks, deep, deep in the red, it feels like a maximum pain type scenario. Like the market narrative for them is just awful. Like all, you know, every AI agentic workflow is going to disrupt them. It's the whole system of record conversation and the and the value of being a great, a great database. Like, where what does the future lie for those companies that have built that system of record? So, like, you know, intuit, Salesforce, all the major ERPs that are you know trading private, privately or publicly, they're in the cross crosshairs of this this market narrative conversation. And as a result, they're they're not they're not trading very well. But I do think that we might have reached maximum fear. I think that is my my current position.

Systems Of Record Under AI Pressure

SPEAKER_03 2:34

No, I disagree. I think we're trading, we're trading on fear and not facts, and I think the facts are gonna start coming through and it's gonna make people even more fearful. The earnings and yeah, I think yeah, look, you know, so I um and I'm not picking on them, but I I canceled my Salesforce account okay two months ago. I'd already prepaid for the year. I just cancel, I mean, I basically deleted the account so someone everyone would stop using it because I was starting to see I had someone that said, Hey, you need to be on Salesforce. They were they loved Salesforce, they like set it up and like, hey, we need to do Salesforce. And then I was like, okay, this is a waste of time. Like everybody's spending their time, and you know, and you know, most of my team, they're not salespeople, we're not doing transactional sales, and so I was just like to shut it down, sunk cost, right? Part of me wanted to keep going with it just because it's already paid for, because I paid a year in advance, so I was like, okay, it's pretty crazy.

Sunk Cost And Canceling Salesforce

SPEAKER_00 3:39

You you canceled it after already paying the year and did it so that people would stay focused on on the right things, on the yeah, on the right things, yeah.

Usage, Renewals, And Delayed Earnings Hits

SPEAKER_03 3:47

And in you know, I'm like, you know, I'm a constant in a constant battle of like I will never fall for sunk cost fallacy, right? So it was one of those things where like I can sit here and quote unquote be cheap and keep plowing ahead with Salesforce because it's paid for and keep pushing my people to do something that was very unnatural, which is tracking all their things, right? We're just done, right? So just killed it. And and from there, we're using a light CRM thing. I would say it's really more of a database of contacts and companies and stuff like that, and it tracks some of our activities and things, but it's far from anywhere near like a Salesforce type product. So the so the thing is, I'm off of it. The sales rep's been bugging me. She figured out, like, oh, there's no users on this account, there's no activity. So the the math that we don't know about all these SaaS companies is most people are not gonna do what I did at scale, especially, which is to cancel their SaaS providers mid-contract. I don't think we know what the activity levels are on these SaaS systems. But, you know, and and I don't think we're gonna see the repercussions of revenue, like uh, you know, from a reported of earnings perspective, because all this stuff is, you know, if you if you bought it today, the revenue gets spread over the next 12 months, right? Because you prepaid and the contract is a 12-month contract. So we're not gonna really know that people are switching in the near term. I don't think anyone's gonna share any usage data with us to say, hey, it turns out I'm not using my HubSpot that much. So I think it's gonna take a minute, it's gonna take a year, right? Because what it's gonna take is at the end of this budget cycle, end of this year, when people go back and IT departments are asked, hey, go budget for 2027. What are we gonna do differently? I heard we don't need these SaaS companies anymore. Then then budgeting decisions will be made, right? So I think every IT company, every every IT company I know right now is grappling with like how do we prepare for next year when our when our licenses are up for renewal.

SPEAKER_00 6:11

Yeah, I think my only my only argument to that commentary would be some of that is getting priced in already.

SPEAKER_02 6:18

Yeah.

Distribution, Switching Costs, And Survivors

SPEAKER_00 6:19

It's true, it's true, you know, the market's trading on that, on that future knowledge that their earnings will drop considerably. And so I think they have a chance if they if people are if if other people are operating with some cost fallacy, which I think other people do, you're unique in that regard, then you know, maybe they surprise to the upside with some of their some of their earnings in, you know, in 2026 and maybe early early 27. I actually I just pulled up this this tweet that I really liked on this on this topic. And I so it's related to all the SaaS incumbents. So economic historians looking back on our period will be shocked at the profound structural advantages incumbents had, novel tokens, world scare, world scare RL environments, incredible distribution, and that they all squandered attempting to contain LLM risk and improve compliance. Their instinct was to try to improve compliance. It's the great fumble of our time. You end up with some weird equilibrium where the vast majority of the market is trading below the value of their tokens, and management and management believes they're doing the right thing by shareholders. It's the first technological shift in history that advantaged incumbents and they'll fumble it.

SPEAKER_03 7:28

Interesting.

SPEAKER_00 7:29

Will will menite us.

Construction Software Stickiness Vs Flexibility

SPEAKER_03 7:31

Yeah, I think that uh, you know, we talk about it all the time. And I think I posted this my Sunday scaries this past week was about founders and like valuing the distribution they've built and monetizing the distribution they have versus trying to expand. Because if you can spin up a new feature, a new product quickly against your existing distribution that will pay more, increase your spend per customer versus trying to get more customers, might be the right model, right? Go deep, which is kind of anti a lot of the things we talk about as VCs a lot of times. Um, so I think there is, I look, these companies do have massive distribution. You know, 10 years ago, someone approached me about buying Lotus Domino. This is the old IBM. It was the for probably the first big collaboration software, Lotus Notes, big deal back in the day, right? Back in the 80s and 90s. And I was like, are you kidding? Like, who's using this? Like, what are you what is this business? And I think the business was doing 150 million a year in revenue. I'm like, this is insane. Like, who are on these systems? It was like some tire distributor in Germany. It was like, but so think about that. That is a business that I don't even know if you Google them, you can find them. I don't know if you could buy the product today, right? But IBM owned them, IBM bought them and they had distribution, right? So do these companies go to zero? No, I think what I think I think where it really shifts is if you're a CRM company and you do not have your customers uh set up in a way that they're using every piece and part, right? So if you say Salesforce is a CRM company, that's one thing. If it's your enterprise software and you're doing it for customer service and you're using it for customer support and like you're using it fully deep into your business, unbundling that from your business, your business process. And you've invested decades in training your people on how to use this software, right? I I think they're not going to zero, right? Agreed. But I do think these new class of companies where the switching costs are low, right? I mean, we deal with our startups all the time, right? There's always some CRM of the week. Oh, we're using HubSpot. Oh no, HubSpot's old man, we're not using HubSpot, we're using Apollo. It's like, oh, we're not using Apollo.

SPEAKER_00 10:03

We're using there's always some new new company that raised a big round this week called Day.

SPEAKER_03 10:08

Yeah, Day. Day AI, right? Like, oh, or the CRM that you wish you had, right? I want I want to try it. I started to like sign up for it yesterday. I'm sure he did. So um, and I got distracted by uh a three-year-old. He's less enthused about how much time dad's spending on cloud co-work these days. But I do think it's the people where the switching costs are low, which is startups, some some SMBs. I mean, if you're an SMB and you're running, I talked to someone the other day, 20-person consulting company, they're running Salesforce. And I said, and like I said, I'm not trying to pick on Salesforce, it's just top of mind, but I was like, Are you you see value? He's like, We've had it for like six years. We're using 10% of it. We use it as a big Rolodex, like we're not really using it. And so, of course, he's gonna switch. He doesn't depend on it, right? And so I think those are the folks that you'll start to see some immediate hits on, right? So I think it all depends because in that same motion, right? Last week Salesforce announced that they just want a five gazillion dollar project, you know, contract with the government. So I I think that's where so what what might start to happen is these large SaaS companies that have distribution within the enterprise where switching costs are difficult, they're fully ensconced, they spent the time millions of dollars to hire Accenture or someone to do a custom implementation, probably safe, right? Probably safe. Their ability to sell net new features into those customers, not sure. But I think down market from there, that's where they get into trouble.

SPEAKER_02 11:56

Yeah.

SPEAKER_03 11:57

Yeah. Now, specifically to the construction space where there's not that much stickiness, every project's its own project. There's a potential insertion of new software. I think it's a it's a little bit different. I think, you know, is someone gonna kick out Procore or Autodesk? Probably not, but do people start using alt software or AI stuff on their own because they have autonomy to execute on their project however they want to execute on it?

Productivity Gains Decoupled From License Growth

SPEAKER_00 12:25

Yeah, probably. But you're you're you're you're saying you're saying industry-related systems of record and incumbent software platforms are more insulated than some of the more horizontal tools like Salesforce.

SPEAKER_03 12:40

Yeah. Because I think I think some of the switching costs, I mean switching costs are difficult, right? It's always a problem. But I, you know, but part of what came out was, you know, when Claude came out with their cowork plugins, and one of them was literally like, here's your legal department, like this module can be your legal department. Of course, all the legal software companies got trashed. But I think you also have to look at it this way, too, is that if people get more productive, here's here's simple math for our friends at Autodesk, right? Construction is growing, there's a lot of construction happening that doesn't necessarily correlate to how many Revit licenses you're gonna sell or how many Procore licenses you're gonna sell. It's not it's not it's it's not connected directly, right? If a if a construction company doubles its revenue, it's not doubling its license spend. Yeah, which is kind of why Procore has their licensing model tied to that's what I was gonna say. Yeah, they actually tied it to your total revenue, right? Right. Autodesk is not tied to that, yeah.

unknown 13:52

Right?

SPEAKER_03 13:52

Autodesk is not tied to that. So if you're doubling your revenue, are you just be are your people becoming more productive? What autodesk products are you referring to? Revit are you construction cloud?

SPEAKER_00 14:04

I don't think it's your isn't isn't value-based pricing. I don't think so. Might be. Revit's not for sure. Yeah, I know Revit's not. Revit's per Revit's per seat, right?

Love For Tools, Brand, And Price Insensitivity

SPEAKER_03 14:16

Per license. Yeah. So who knows if you're increasing your number of seats, and you're definitely not, you know, um, in services, if you double your revenue, you may or may not be doubling your teams, you might be actually becoming more efficient by using the AI tools in the areas where you haven't been able to be efficient. You know, like if you think about if I can be very efficient in RFP generation and write proposals faster, I'm probably gonna drive more business. It doesn't mean I'm buying more Revit licenses. Or if I can automate Revit through AI, which is I've seen a ton of people doing stuff on like that, then I'm not gonna buy more licenses, which is another variable to think about, right? Like I look at like I'm running Cloud Co work with a bunch of little MCPs. It's making me very efficient in PowerPoint. It's making me very efficient in Excel. So that means I'm probably not hiring someone else to do that work. So therefore, I'm not buying another license, another Microsoft Office license. Yep. So yeah, I don't know what the market's doing today, but I mean I I think it's I think a lot of the reaction was from the anthropic news. But I but you know, there's one thing to think about, right? When people love the product they're using, I don't know if they care about all this stuff.

SPEAKER_00 15:38

You know that they care about they're they're that they're gonna scrutinize that they're gonna scrutinize the decision, the cost, the you know, growing growing their number of seats, value-based pricing. You're just saying, like, if you actually love the software, you're gonna you're just gonna stick with it because it's the the brand the brand suits you. Right.

SPEAKER_03 15:58

It's like, hey, something Adelo, maybe raise the price of Excel, and people will probably just pay it. Because if you love Excel, you love you're gonna use it, right? I'm not sure. Everybody in the room, raise your hands if you love Salesforce. Not a lot of hands go up. Yeah. Tell me if you love SAP. Like, no hands go up, right? So I think this is also a point of contention where people that have preferences, it's a great time to bash the software you already hated and make the case for getting rid of it. So I don't think there's a lot of joy, you know. Once again, 2026, my word of the year is joy. And I think I don't know how much joy people get out of Salesforce or SAP or workday, or you know, I mean, we love, I mean, some of us just like love our Excel. Yeah. I mean, like charge me 10 bucks more. Like, I don't care.

SPEAKER_00 16:51

Yeah, price, price insensitive. Imagine imagine the knowledge per the knowledge working class, the white-collar class losing their Excel privileges.

unknown 17:02

Right.

SPEAKER_00 17:03

I mean, what would we do? We have to get calculators out.

SPEAKER_03 17:06

People would quit.

SPEAKER_00 17:08

I mean, the world war. You've seen the meme, right? Where the you have the guy holding up the the globe on his shoulders, and it's like the financial system being held up by Microsoft Excel.

SPEAKER_03 17:21

Ray Dalio says we're gonna have a civil war because of X, Y, and Z. I'm like, take people's Excel away and you'll have a civil war.

SPEAKER_00 17:28

That's real.

Personalization, NL Interfaces, And Joyful UX

SPEAKER_03 17:29

So I just think there is something about like the love of the tools you use. It was kind of funny. You know, we did our quarterly meeting in Half Moon Bay last month, and we had a couple executives from Milwaukee Tools attend. And and Barry, our CTO, he's a big fan of like he would works and stuff. Barry's gonna be very upset. I'm telling people about his personal business here. But there's some Milwaukee drill that he just loves. And we're at dinner and he's talking to the Milwaukee Tools guys, like the MX200 or something, like I don't know, whatever it is, right? He's like, oh man, it's amazing, blah, blah. And I was just like, this is what Joy looks like. Right? This is what Joy looks like, where he is spending good hard-earned money to buy Milwaukee's tools, whatever, whatever their tool is, that he is just loves. And even talks about like, I didn't really need it, I had other tools that could do the job, but I had to have it and I love it. Right. And so I think you know, we deal with a lot of startups, we talk about product market fit. I mean, how many of these companies, these you know, they're like, Oh, yeah, this does a good job. How many of how many people like love it? If you took it away from me, like I'd have to come for you. Or charge me whatever you want, I'll pay it. Yeah. Right. And so I think there could be part of this is you know, it's what people are saying and what people are doing are not always the same thing. And what people are doing and what they're saying is rarely the same thing, right? So I think there could be some things going on where I needed an excuse to get rid of this cloud software that I hate. And now I have it.

SPEAKER_00 19:13

I think there's a I mean, a part a part of our thesis on the application layer that sits on top of these systems of record that would sit on top, that would integrate with a per core theoretically or an Autodesk, or you know, on the engineering side of Dell Tech, AEC360, et cetera. The thesis is that these applications that you're using most of the day, just pulling in the data from these from these incumbent software platforms that are it's really just a you know, it's it's a database, it's a data management software. And but the thesis is that actually using the applications are amazing because it unlocks, I mean, you're it's natural language query, it's doing loads of work for you and spitting out things that you've never been able to previously do would have taken you months. Like I'm thinking like the engineering use case that is a product in our portfolio of resource allocation and planning. Like very difficult, impossible to do in in the incumbent databases. Like you just can't do that. And so that that that work gets gets done more, it's more cognitive work by you know, by senior management that's trying to figure out how to how to staff projects appropriately. But if you could natural language query that and it and the data was strong enough to help you figure that to help you solve that problem, that's a that's like a really that's a joyful experience because it's saving you literally months and it's maybe doing better than you were doing previously because you're having to do it all in your head.

SPEAKER_03 20:43

Right.

SPEAKER_00 20:44

The date the data set is too large for you to cognitively do this in your head, right?

SPEAKER_01 20:48

Right.

SPEAKER_00 20:49

So spreadsheets and you're trying to make sense of it, and you're there's a lot of guesswork, but you can be really precise with these application tools. So I think like to me, that's a that's that's a big thesis I have with the application layers like you're you're delivering an experience that is transformative and that people can fall in love with, and they're gonna want to use those tools before they log into their CRM, right? Like they're gonna they're just gonna want to go, you know, like they're gonna want to go there first. That's their user experience, that's their interface. And over time, like the value just decreases from the that the incumbents currently hold and the pricing structure, you know, more or less just demolishes over time, yeah.

What Incumbents Must Do To Stay Relevant

SPEAKER_03 21:31

Well, think about this, right? Where do where do we exude the most joy in a product, right? It's either we feel like we're part of something, like a luxury brand, right? Or there's a high degree of personalization that resonates with me, right? There's this personalization aspect. And if you think about computers in general, a lot of I remember I remember back in the day, I had these graphic designer friends that just loved their Macs. And I never understood it, right? Because that was the world of Windows. It's like, what are you doing, dude? Nothing is compatible. You have to run some, all these dumb tools, right? But what they would tell you is like, if you went and saw how they customized their Mac for them, it was very different. Whereas Windows, it was like, no, this is how Windows looks, right? And I still find it fascinating on computers like screensavers and wallpapers and changing like this customization. And I've had friends that like When they buy a new machine, they maybe spend half a day like customizing it for them. And I'm like, no, just take it out of the box and get to work. Maybe adjust the font sizes because I'm getting older, right? Like outside of that, like let's go, right? And so I think what you're seeing with some of the you know the natural language and the LLMs and what Anthropic is doing is we're really bringing we're unlocking a different layer of personalization of how we interface with the computer. And you remember the, I mean, why does it matter what color a Mac comes in? It has nothing to do with computers, right? And back in the day, they had that iMac that was like the full, like it was everything all in one. It came in like blue and yellow and orange. Like, why does any color matter?

SPEAKER_00 23:23

Yeah, yeah. Right.

SPEAKER_03 23:24

Does that matter, right?

SPEAKER_00 23:25

Was something on it? Yeah, give you a choice. I mean, it's like the same thing. Like, why do why are there different iPhone colors?

SPEAKER_03 23:31

Right. They all work the same. But Apple understands the personalization. Like, people want it, people are unique, they want a level of personalization. So I I do feel like one of the things with kind of call it core software that's running companies is it's the company's software, it's not my software. I have to work within its system and how it likes to do things, not how I want to do things. So I so I my my free will and having a personalized experience at work with corporate does not exist. I have to comply, comply and conform, right? So I think where you're seeing a lot of this stuff with anthropic and the cowork and why people are, I think people are excited about that stuff because it's a high degree of personalization. It's not you have to click on these three buttons. If you don't click on these three buttons, it doesn't work. And so I think there could be some underlying kind of psychology around that. But I think what does these large incumbent software like what do they do to make keep themselves relevant? Right. And I think part of it is it's like one-on-one of our startup world, right? Go talk to your customers, go spend time with them and leverage AI to give them a better experience, that they, you know, a better personalized experience. Because it's amazing when you talk to these big companies and say, you know what would be really great if you guys could deliver do it this way. It's like, oh, that's on the roadmap, which is all a big lie. When they tell you it's on the roadmap, that's a big lie. It's like, oh, that's a great idea. And some matrix organization of industry, what do they call them? Industry evangelists and segment leaders all get in a room and decide like whatever you wanted is not important, and what they wanted is important, right? So I think this is a massive opportunity for a lot of these incumbent companies to reframe how they're thinking about this and say, look, you know, we want to give you because by the way, if they're using AI coding tools on the back end, why can't they do these customizations? Why can't they add more features? Why can't they make it so that I can have a personalized experience? Like my Pro Core looks different than your Pro Core. Why not?

Management Bloat And Value-Based Bureaucracy

SPEAKER_00 25:50

Yeah, in theory, you should be able to deliver that. I think it's just like large, large, large company issues, large code bases, and and not, yeah. I mean, uh to me, it's like more of a it's a it's it's a management and size issue rather than like it. I think they know the answer. That's that's kind of my point. They they know what they need to do, it just doesn't get done.

SPEAKER_03 26:12

Yeah. I think the minute a technology company turns into a value-based company, right, becomes like a corporate, it's it's no longer a tech company, right? And you have people on the team product that don't know how technology works. I think once you jump that shark and you're starting to hire product managers that have never written a line of code in their life, you know, don't have that core ethos of building a tech company. I think that's when they're like, then they start creating spreadsheets of like, well, this feature is gonna cost us X, and we'll only be able to monetize it for Y.

SPEAKER_00 26:51

Thank you, I think everyone knows our thoughts on incumbent software companies in this. The problem is it's not even controversial because they all just agree with it. We've we've been beating beating them up these last couple weeks.

SPEAKER_03 27:04

We we we get no uh listener mailbags like, oh my god, why are you being so mean to them?

Fundraising Pain: Story Vs Substance

SPEAKER_00 27:10

Speak they're all speaking of speaking of beating people up. There's like actually a couple of different ways I could transition this. Speaking of beating people up, the I feel like there's a there's somewhat of a a critical message we uncovered with with one portfolio company in particular this week that by all accounts is doing they're doing amazing. They are executing across the board, they are pulling demand through. Traction is arguably better than any of any of their competitors, but they're they're struggling to fun fundraise. And it's a it's a topic we wanted to bring up this week because I think it's I actually think there's a proclivity for built world AEC prop tech focused startups to fall into this pattern where they really struggle to raise money even when they're succeeding and even when they're executing and they have real substance. I think it's kind of in the nature. This is my this is, yeah, I mean, maybe maybe this is my opinion, but in the nature of the people that are building in our space, they index so hard hardcore to delivering substance and being so fact-oriented, matter of fact, with the vision they're painting for their company and what they're doing and what they are, what they are today and where they're going. And so we had a call with this portfolio company, and I think you did a great job of beating into them, beating them up a little bit on the fact that the fundraising issues are a uh a problem that of them appropriately tying their their vision and tying the big story, the big story narrative, the story arc, that has to be present for any future investor to get excited. They have to any future investor that's investing now needs to be able to see 100x. And if you're if you're if you appear to be too narrow, it's okay to start narrow, but if you appear to be too narrow in the vision, you get pigeonholed into being something something that a venture investor is not going to get excited about. Many things, but but certainly that a venture investor is not gonna get excited about like a single a single use case, whether it's in software or hardware. And so I want to well, let's so let's just talk about this. So your advice and feedback to them was was what in particular?

Tell Me Vs Show Me Across Rounds

SPEAKER_03 29:34

So I was trying to be critical and kind. I'm still working on kind with them, but I think I think there's a dynamic, right? And it it's kind of it's tough for founders, right? You're so busy building your company, it's hard for you to keep your head up and know what's going on in in markets, right? Because like the conversation we're just having, to tie back to the conversation we're just having, is like when founders want to look at their valuations, they can argue with you and I all day long, like SaaS is not dead, you guys are out of your mind, blah, blah, blah, right? Whatever, whether we're being hyperbolic or what. But when you do comps, public markets tell us what things are worth, and it gets extrapolated back to your current startups valuation. So you can't say you were worth X times revenue two years ago when Salesforce was trading at 30x revenue, and now that they're at 3x revenue or whatever they're at, you get to say, like, no, we're still trading the same. Like so, there is correlation, maybe not directly, but there is correlation around the the the public market. So I think one of the things that I was trying to explain to them was as a founder, uh, we go through cycles of show me or tell me. And early days, when it's just you and a buddy and you don't even have a pitch deck, it's all about tell me, right? And you're telling destroy, tell me what you want to do, tell me about the opportunity, tell me how you're gonna execute on it, tell me what you don't know that I'm gonna fund you to go figure out, right? Because you're not supposed to know everything, right? So and I think what happens is you go through those tell me phases and and you get funding, and then you start going through this like show me phase too early, and you fixate on the show me versus going on and extending the story, right? You gotta extend the story and keep telling me. And I I think what happens is there's this, you know, walk and chew gum. You gotta be able to do both, you gotta be able to execute and show me, but you have to continue to tell me like what's next and what's next. And I think if all you do is pitch investors on that you met expectations from your last round, and they're not good enough, right? And I think you brought up a good point on the call. You were like, well, I mean, that's how private equity thinks, that's not how venture thinks, right? So I think you've got to like continue to index towards telling the story. And and I think what I told them on the call, like you guys are gonna be so mad when these three companies that have nothing, they have nothing on you, they have no customers, they have a really cool website with a bunch of rendered images of what they're doing, but they have nothing. We all know they have nothing. They're gonna go raise out, go out and raise$50 million in a seed round and be the talk of the town, and you're gonna be like, they have nothing. How do they raise money? And my point was because they're telling the story well. Go to their website, they're telling the story well. They're they're in telling mode, and you guys are too focused on like show me mode. And so I think my advice to them was you got to keep telling what's next, you got to keep talking about what this end state of what you're building. Because I don't think any founder wakes up in the morning saying, okay, I'm gonna build this first product and then I'm done. And if you do, no VC should have funded you.

SPEAKER_02 33:08

Yeah.

Painting The Next 100x Narrative

SPEAKER_00 33:09

Right. Well, yeah, and yeah, and I I think you called this out too, but I think it's okay. One of the dynamics that trips people up is they think about they think about this in relationship to how they're talking to their customers versus how they're talking to their to prospective investors, not even existing investors, prospective. So getting an getting a new a new venture investor requires them to believe that you can more or less 100x from where you are now. If you've increased the enterprise value of your company, call it by by three, five, 10x from where you started from that from that initial round that you raised, where's the next hundred X coming from? Is it for is it just from that narrow, that narrow idea? I I doubt it. I I mean it's usually you do need to expand the product platform in a way that is gonna allow you to achieve another 100x. But to your point, every single round that you raise, whenever you, whenever you have a step function improvement in your in the valuation of your company, you have to extend the story to to show where that next 100x is gonna come from. Later stages, it may not be 100x, like if you're at series D and you're 11 labs, you probably don't need to show the 100x story, but you probably need the 10x story. There has to be another set of investors out there that believes the 10x story of when 11 labs goes public and the public markets are gonna eat it up because they're you know they're an AI adjacent trade, right? And the the you know, the the growth story is isn't is intact. But I think what I've noticed is is back to the man, I feel like I need to be communicating the substance piece more about all that we've done and all the traction we've generated and and what I what I did previously. They get they get tripped up because that's what customers in the industry want. That's what they want to know. They want to know what have you done, what have you built. We're a conservative industry and we we need we kind of need to, you know, uh we need to understand the nuances and the details of that. But what they're doing is they're not looking into the future at all. They're just telling the story of like, here's what we accomplished, not where they're not where not the new path where they're going. You know who's really good at this?

SPEAKER_03 35:22

A lot of them are like Elon Musk does a very good job of this. It could be very easy for him to say, let me show you what I've done, write me a check. He could be all about show me. He's not, he's always talking about like, and it and I think maybe that's why people think it's so wild because he is accomplished instead of just saying, like, he does both incredibly well. Yeah, like he does a really good job of saying, like, hey, let me tell you what we're doing. We're going to Mars, right? He doesn't have to do that. He can just say, Hey, I'm Elon Musk. Let me show you my returns that I've delivered for investors over the years. Write me a check. He could be all, he could, you know, he could be all about substance and not about sizzle all day long. But why does he? Right? And I think it's I think it's this idea that like, and I think the reason why investors, you know, people are like, well, storytelling, it's like it's a farce, it's marketing. What I'll tell you about storytelling is I think storytelling, you can quickly tell how on mission that founder is and how much they're into the story they're telling.

SPEAKER_00 36:33

I think it's a great point.

SPEAKER_03 36:34

Like, right, like, and so it's like you can't I mean you can't show up disingenuous and say, like, oh, I'm gonna put people on Mars, right? Like you act, people people can see it when you're telling the story and you're being emotional and you're being authentic. Invest if and people investors can tell whether they whether you actually believe it, and that's what they get behind. They can tell when you're lying about it too. But I don't think there's a person on the planet that doesn't think Elon Musk thinks he can do the things he says he's gonna do.

SPEAKER_00 37:05

You you and you know why that's true? Because he because he believes it. He believes it 100%. And that's why it's not it's not a far-fetched story he's telling. He actually genuinely believes he's gonna do it.

Investor Psychology And Founder Magnetism

SPEAKER_03 37:16

Right. And and you know, and and he because he's who he is, he's polarizing. And I'm one of these people like you're allowed to like people for certain traits and dislike them for other traits, right? But you know, you can you can have both. But I but I do think that's where I mean, if Elon Musk is out there telling stories, what makes you think that for your series eighths pitch that that you're now like exempt from telling stories instead and exempt from telling the vision? And and it's funny because you know, a lot of my you know, a lot of my friends in the VC community, you know, they never tell me. I've never heard one of them, these are very successful people, you know who they are. They're very successful. I've never heard them say one thing about the economic outcome of a company they've been investing in. I've never heard them say, man, I'm up a hundred X. I've never heard them say, they're like, KP, you got to meet this founder. This guy's phenomenal. He's an amazing founder. Let me tell you, this is what he's working on. Blah, blah, blah. And I'm like, they never say, hey, I think I can get 100x out of this one. I've never heard that come out of their mouth. Now, do they need to do all those things? Absolutely. But I think that's also like a foregone conclusion that as an investor, you have to make money, right? But what resonates them to a deal is the fact the energy, you know, you're bringing the podcast energy transmission today. The uh the energy, the enthusiasm, the ambition, right? All those things. That's what they that's what they always tell me. Like when I get the text, like, KP, I got this founder. I'm gonna introduce you. Check your email. You got to meet this guy. I've never heard them say, I've never gotten a text from one of these guys saying, Hey, you need to come in on this deal, it's easily 100x. Never heard of that. I've never heard about an economic outcome tied to meeting with the founder. It's always been like, you gotta see what these folks are doing. It's amazing. Doesn't mean they invest in 100% of them, but it gets you to the dance.

SPEAKER_02 39:19

Yep. Yep.

SPEAKER_03 39:20

Have you ever heard of a VC say that to you? Like, hey, you need to meet this founder because I think we can make 10x on it.

SPEAKER_00 39:26

When when when V when VCs are are doing the GM thing and talking and you know, and and trying to introduce you to portfolio companies or companies they're looking at, there's never a return conversation. It's just like, how what are they doing that's novel, novel and different? It's hey, here's why this founder is special.

unknown 39:48

Right.

SPEAKER_00 39:49

Here's their background, here's why they're why they're amazing. And or you know, here's here's the team, like the tea, here's the pedigree of the team. That's it. And it's like you should just chat with them, meet, meet, me, meet them and decide for yourself. But yeah, there's to your point, there's no, there's no there's no return conversation being had, other than I would say the only time it comes up is like when comps are being referenced to to the particular company or con the concept they're building towards, right? So it's like, hey, this is the you know, this is the sales force for for construction, right? Like that sort of comp sometimes, you know, and and then you do, you know, you do the math and like, oh, their enterprise value is their market cap is 100 billion. And that that's the only time numbers come up.

Brand, Media, And Pride In Portfolios

SPEAKER_03 40:36

Yeah, I I think that's probably about right. When if they think that because we're mostly seed investors, if it if it's like, hey, the valuation might be a little rich for you guys just because I know you want to have a certain ownership percent. I mean, it's more about that. It's but I I've never really had any VC say, like, hey, this is a rich deal. If they're like, no, it's just what the valuation is. And you know, if you if you're interested, I'd love to introduce you, but it might be a little out of your strike zone from writing a check perspective. But I but I think that's the and I think some founders need to be reminded of that. You know, it's not it's not about getting, and I like what you said. It's like, look, delivering a high return from your seed from your pre-seed to your seed. Yeah, so what? Tell me for the new set of investors. For the new set of investors, yeah. How are you gonna get me from a series A to a series B? And what does that look like? And you have to have even much, you have to have a lot more enthusiasm and vision around that. I think, you know, I I think that the that was kind of the point this morning is like guys, you you gotta start, you gotta tell, not show.

SPEAKER_00 41:40

Yeah, yeah. And I think the back to your Elon comparison, I think the the cat the counter to this argument would be, you know, at some point you do have to show something, right? Yeah. Some point someone's gonna say, Hey, what have you built with the hundred million dollars that you raised? And of course you have to execute on that. Of course you have to deliver on that. Elon, like to, you know, to Elon's credit, he all he always delivers. Like he he he, you know, I mean that that's what he's known for, is is executing executing on these, you know, on these on these crazy valuations and still building, you know, create crazy return profiles for for companies that have astronomical valuations already.

SPEAKER_03 42:24

Yeah, I I doubt it's real, but there was this screenshot that was floating around where it was like Elon texting with Larry Ellison about buying Twitter. Oh, yeah, yeah.

SPEAKER_02 42:34

Actually, I was just I think that's real.

SPEAKER_00 42:36

You think it's I mean, I don't know.

SPEAKER_02 42:37

It's interesting.

SPEAKER_00 42:39

I think it's documented like it was in Discovery or something. Oh, really? But it was just like legal discovery when that when the when the deal was being scrutinized.

SPEAKER_03 42:48

Yeah, yeah, because it was something like, hey, I'm buying Twitter, you in? He's like, Yeah, I'm in for two 250 million or something.

SPEAKER_00 42:55

No, no, he said he said he said I'm I'm in, count me in for a billion. And you Elon's Elon's response was I might need to get you up to two. It's gonna be a it's gonna be a massive, massive win. He goes, Count count me in. Yeah, and what happened to Twitter? Just just ra just raised, yeah. I mean, cool. Twitter, Twitter is now part of SpaceX, who's gonna IPO this year for maybe the largest IPO in the history of the world, and they're gonna make out. They're gonna make out, right? Projected at 1.5 billion a trillion as of as of yeah, as of this week, I saw.

Two Narratives: Customers And Investors

SPEAKER_03 43:30

But I mean, I I also think that like investors, I mean, you have to, I think there's a there's this idea like you have to execute, and if you execute, you might win or lose. I think the only time I know for us, like every once in a while, it's actually kind of funny. We talk about it all the time, where we talk about like we need to do more, maybe we need to start trying to do some arranged marriages within our portfolio, because we have a founder that's working on a really hot idea, but just doesn't have the right stuff to make it happen. And then we have another founder that's got the right stuff working on a kind of a terrible idea. We're like, let's take this person and put them over here, right? Um but I I do think the founders really have to start kind of you gotta reset your vision. I think if you're if your pitch is we're at a million in ARR. I think nobody really cares. I mean, nobody cares. Not really, and they care, but that's not the leading point, right? The lead the lead in is not that they Have a million in ARR. It's like here's what the founder's working on, here's where they're going. Here, like the story. Oh, by the way, their proof is they've got a million in ARR. That's their proof point. Totally right. That the dog's eating the dog food. Cool. Let's go. Yep. Totally right. Yeah. We did talk on that call a little bit about like my first startup and how my investors were mad at me because I was in a dingy, terrible office space. And they were like, You just raised a bunch of money. Why aren't you in a nice, nicer office space? And and I do think that there is a dynamic where people want to be proud of their investments. 100%. You know, and I think that pride in their investments is as much about pride in the founders that they backed, right? I think you brought up on the call like icon, right? Early investor and icon, like we talk about it all the time, right? Economically, TBD, right? TBD. However, you got guys like Jason and those guys that like you still want to be part of what you still want to be part of their journey, right? And I think to me, where icon starts to go lukewarm to me is if like someone like Jason decides to go do something else. I guess we had a good run, you know.

SPEAKER_00 45:56

Yeah, he's too too important to the the mission and vision of that of that company. If that becomes untethered, then yeah, you quite you question what is their North Star.

SPEAKER_03 46:08

Yeah. Remember when the former CEO of Pepsi took over Apple and kicked out Steve Jobs? Mm-hmm. It's like the same thing, right? At some point, like it comes down to the person and their their vision and mission and and and living it and owning it, I think.

SPEAKER_00 46:23

Yeah, the the comment about your investors wanting nicer office space for you. I I think that's like I'm trying to think of the modern day equivalent for that, because most investors are not going to the portfolio company's office. Like, in fact, many of them, many of the investments we have, like, you know, they're working in, they're working at home, they're working remotely, maybe they're working in a factory, right? It's the web, it's just the website and swag. Yeah, I mean it's and it's me, it's media. It's it's like, where can I show where can I show you off at a dinner party?

Roles: CEO Vision, CTO Execution

SPEAKER_03 46:56

Dude, Andorl, their swag store, they sell swag. It sells out, it sells out, yeah. And you see, like, I've had to like text our friends there and be like, hey man, like any like, dude, that's sorry. Can't you know? I might be able to get you into our next round before I can get you that hoodie.

SPEAKER_00 47:21

You know, it's like wild, right? Supreme supreme brand dynamics.

SPEAKER_03 47:27

Well, they've got that because Palmer has that Game Boy company, he read the RetroMod, RetroMod. They they launched an Android branded retro mod. Yeah, yeah, oh yeah, like it's gold. Gold. You can't like you can't get your hands on it. You're more likely to get in the next round than you are to get a hold of one of those.

SPEAKER_00 47:46

If they do a if they do uh an an N64 modern retro in 64, I'll buy that. That'd be amazing. Like a true millennial, yeah. Yeah, anyway, so just to close that that thread, I think the you know, the show the showmanship piece really does matter in fundraising. And I think it's like to me, it's a know your audience kind of thing. Like you cannot be, you know, narrow, narrow, narrow. Here's what we've done in the past when talking to prospective investors that are trying to anticipate where you're where you're going. You need to change the narrative for them and preserve the narrowness and the you know the the the evidence fact-based conversation for customers.

SPEAKER_03 48:34

Yeah. I do think because I think it came up on this call, which I think is also fair, right? We deal in a sector where there's like high context switching. You're dealing with customers that are contractors. They don't want all the adjectives, they don't want to hear about the vision. They want to know does if I buy this from you, does it work? Right, which is a very different story to tell versus the investors. And we were like kind of saying, like, maybe you need two websites. Maybe you need a product website that is for customers and prospects, and maybe you need your corporate website that's more about the vision and mission and where you're going and all that stuff. Because I think as a founder and you think about context switching, that that's asking a lot, right? Getting off a call, trying to sell 20 licenses to a big GC that wants to understand what our SOC2 compliance is and shit like that, right? And then you're gonna turn around and talk to a premier VC that wants to know what your vision is. That's that's a lot, you know. So it's not so I think that it's it's easy to be critical, but I think that's part of the issue when you have limited resources to really be able to constantly switch between those two constructs.

SPEAKER_00 49:50

100%. Regardless of if you choose to have two websites, I think, I think it's a great place to start in figuring out the right narrative for your investors of just like blank slate. You do not need to pull forward the the existing artifacts, you know, and and try to solve both at the same time. Like solve the like answer the investor question first and build on a blank canvas to to shape that narrative. And then you know, the customer narrative can be re refined on you know on the other side. I think it's like to me, that's a like a practical, it's a very practical way to actually solve this problem in the short term.

SPEAKER_01 50:30

Yeah.

Delegation, Distribution, And Closing

SPEAKER_03 50:31

And we need to wrap, but I I do think the next layer of this is this is why the co-founder dynamic is so important. I think it's I think that's where like you know, the the hustler and the hacker dynamic. I think if you have two, if you have two hackers, you're never raising any money. It's really hard. If you have two hustlers, you're never making a customer happy because you're never delivering anything. You're too busy selling everybody, right? So I think the dynamic, the co-founder dynamic of, you know, what's the difference between the CEO and the CTO? And in my world, the CEO is about constantly building out the the market vision, iterating it, selling it, being the megaphone for the mission, and for the CTO to show up and match it up with kind of a technical vision and execution right along with that. And I think those are the if it's a two-cylinder engine, that's how that works, right? And I think that's that's a that's an important dynamic. You know, if you're a founder, you're trying to figure out like what your co-founder should look like. It doesn't hurt to have a co-founder that's kind of polar opposite when it comes to that. Steve Jobs, Steve Wozniak, Bill Gates and Balmer.

SPEAKER_00 51:49

Yeah, yeah, it's real.

SPEAKER_03 51:51

But you you know, Elon doesn't have that. It's just Elon. Just Elon. I so I met some people that work for him, and I was like, how often do you talk to him? And they're like, once a year for 15 minutes. I'm like, really? Like, you have a pretty important role in his enterprise. They're like, if you get more communication in that, you might as well start putting your resume together. Yeah, like it's a good thing that I talk to him for 15 minutes once a year. Yeah, anything more than that, like start getting your resume together, start boxing your stuff up because that's that he's showing up.

SPEAKER_00 52:28

So try try the co-foundered co-founder dynamic with the open AI founders. That didn't work out too well.

SPEAKER_03 52:36

What did you say the other day when we're talking about like claude co-work? Why I'm probably like enamored, like I'm very good at delegating.

SPEAKER_00 52:42

Yeah, yeah. You're yeah, your your in your instinct is when you have when you have work shown up on your desk is to del delegate and and you know, push push it down to people. So you can stay high, you know, you can stay at the abstract level, the high being the megaphone, like you just described. Like you're not gonna let let you know daily busy work get in the way of that.

SPEAKER_03 53:05

No, I got an email from the president of a very, very large global company today. And he said, he's like, I don't know where you have the energy, and I don't know where you have the ideas, but your Substack is one of the things I look forward to every day. Cool. That's nice.

SPEAKER_01 53:24

That's nice. And I was like, I didn't even know you were reading it.

SPEAKER_03 53:27

And I looked him up and he's on the free subscription. Like, yo, like subscription.

SPEAKER_00 53:34

Fire up Claude Co-work for personalized personalized dirt direct direct marketing email to him. I think I put my paywall way too far down on the content and you move it up. Yeah, you need I think you need to, yeah, you should offer him a special uh ten thousand dollar a month price.

SPEAKER_03 53:55

Yeah.

SPEAKER_00 53:56

Premium pricing.

SPEAKER_03 53:58

Yeah, if you get the paid subscription, it comes in every day. If you don't pay for it, you get the weekly summary of everything.

SPEAKER_00 54:06

Like it.

SPEAKER_03 54:08

All right, man. Good chatting.

SPEAKER_00 54:10

Talk to you later. See ya.